ANZ says NZ business is recovering well

ANZ Group said the profitability of its New Zealand business is recovering well from the lows of the second half of 2009 and the first half of 2010.

The Australian bank owns both the ANZ and National Bank of New Zealand banks and fund management business ING, which is being rebranded OnePath.

It made the comment about the New Zealand business in an update for the nine months to June 30 released in Australia.

"While the lagged benefit of repricing the fixed rate book has seen a small improvement in margins, head winds from higher funding costs, both for wholesale and deposits, remain significant," the bank said in comment on its New Zealand business.

It said costs were being well controlled and provisions are moderating, especially in the retail business.

The parent reported an underlying profit of $A3.6 billion in the nine months to June 30, up 26 percent on the same period last year.

The bank's comments about its new Zealand business as similar to those made by Commonwealth Bank of Australia about its New Zealand unit ASB earlier this month.

ASB said it is earning lower margins on deposits in an extremely competitive market, but a move by customers from fixed-rate to higher margin floating-rate home loans is an offsetting influence.